Appeals Court Says Companies Can Be Guilty Of Inducing Infringement... Even If There Is No Direct Infringement

from the going-off-the-reservation dept

Another day, another troubling ruling out of the Federal Circuit court (CAFC) which handles patent appeals. We wrote about this a little over a year ago. It actually involved CAFC reviewing two separate, but similar cases, concerning whether or not companies could be found liable for inducing infringement if no single party actually violates the patent, but a group of different parties, combined, serve to infringe on all the claims of the patent. This is tricky for a variety of reasons. In one case, involving Akamai suing Limelight, Limelight doesn't directly infringe on all of the claims of Akamai's patents, because some of the steps are completed by Limelight users, rather than by Limelight itself. Similarly, in the case of McKesson v. Epic Systems, Epic doesn't infringe on any of the claims of McKesson's patent -- but in combination, its users may do so, though none do so individually.

So here's where it gets tricky. The lower court had found that since no single party infringes on a patent, then there's no direct infringement. And if there's no direct infringement then there's no infringement that the defendants could "induce." This seems reasonable. The fear, with these cases, was that CAFC would say that multiple different parties, each doing different pieces that are covered by claims, could be lumped together into direct infringers, even if none of them fully infringes. That could create massive liability for purely innocent bystanders who do a minor link in a chain.

Thankfully, CAFC does not go that far in its ruling (though one dissenting judge felt it should). Instead, it just basically wipes out the concept that you can't have inducement without direct infringement, arguing that inducement is apparently something entirely separate from direct infringement. That's... troubling. You can see the reasoning (and it's worth reading the whole thing), in that they're saying if multiple parties, through their separate actions, combine to infringe -- and all those actions are directed by a third party -- then isn't it reasonable to assume that that party is still "inducing" infringement? But, as the dissenters note, that seems to be making up a wholly new interpretation of inducement, far from the one that Congress or the courts has allowed in the past. As one of the dissents notes:

The majority opinion is rooted in its conception of what Congress ought to have done rather than what it did. It is also an abdication of this court’s obligation to interpret Congressional policy rather than alter it. When this court convenes en banc, it frees itself of the obligation to follow its own prior precedential decisions. But it is beyond our power to rewrite Congress’s laws. Similarly, we are obliged to follow the pronouncements of the Su-preme Court concerning the proper interpretation of those acts.

In other words, CAFC's majority ruling here has gone off the reservation in a big way to fashion a ruling of how it thinks the world should work, but not in accordance with what the law actually says.

It also opens up a huge can of worms. Because even if no one party is actually infringing, suddenly third parties can be liable for inducing infringement. Infringement that... um... didn't occur. So that seems like a problem. Of course, it would have been even worse if they had gone with the plan that cobbled together direct infringement by all the separate players, even those who were doing very minor things (such as tagging content, in the Akamai case).

Either way, it seems likely that some of the parties here will ask the Supreme Court to weigh in, and hopefully they'll clarify that without someone infringing directly, there is no infringement to "induce."

So in order to infringe you have to induce someone else to infringe but if they're infringing then you must not be infringing but if you're not infringing then you can't be inducing so they can't be infringing.

So if we extend this to copyright law ...

If we extend to copyright law, if you got 50,000 people to tweet a single word of a short novel to the same hashtag, although none of them are truly guilty of copyright infringement for a single word, collectively they are guilty? And, through the mere fact that Twitter allows this to happen, Twitter is guilty of inducing infringement?

Hmm...

So let me get this straight... If I develop a patent and a company steals that patent without paying me, I can sue them. If they use MS SharePoint in their computer servers, I can sue Microsoft for helping that company induce infringement since Microsoft wasn't directly involved. And I can sue Apache, Inc. for allowing Apache web server to be used in the company that infringed, even though they aren't "directly" involved... I can sue the vending machine owners in the building for supporting a company that infringed since they're not directly infringing... I can sue the electricity making company for givng them electricity... I can sue the toilet bowl making company for having their crappers in the company's bathroom... I can sue the building owner for allowing the infringing company to stay in the building... I can sue furniture manufacturers, light bulb makers, pencil and pen makers, ceiling tile makers, carpet makers, drywall makers, construction workers, etc. etc. etc. because none of those "directly" infringed, only indirectly.

So logically, since the building foundation sits on the planet Earth, I can sue everyone on the planet for allowing the building to sit there and the company to be inside.

Wow!!!! I'm heading for a payday!!! MONEY!!! MONEYMONEYMONEYMONEYMONEY-.... err... wait a minte. I'm on the planet... So would I have to sue myself, too? Fuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuu.....

"Because even if no one party is actually infringing, suddenly third parties can be liable for inducing infringement. Infringement that... um... didn't occur. "

Incorrect. While the infringement may not have been pursued in a legal sense, it can still have occurred. That is to say, a site which sends 100 surfers a torrent magnet link/file can still be guilty of infringement even if you haven't proven the infringement, because the infringement is still clearly occurring.

I would have to say Mike that perhaps you should spend some time on the affirmative part of the ruling (rather than just the dissenting opinion you like) and try to learn and understand why they got there. I hate to say it, but your quoting of the dissenting opinion is another part of your monotone approach to the subject.

Can you write an equally compelling piece that looks at the affirmative opinion?

Incorrect perspective

Your perspective and conclusions are, entirely, erroneous. In fact, your position can only be that following the large corporate interests in their Amicus positions supporting the losing Appellee. Please explain the fairness in the following scenario:

A: Spends years and valuable resources to pioneer and ultimately obtain a method patent to instruct and teach others how to carry out a truly unique 25 step program.

B: Large company that manufactures a gateway that clearly covers 20 of the 25 steps. However, for B's gateway to be monetized and to be useful to the public, there must be 5 more steps carried by a third party.

C: Clearly, the third party (or parties) have no contract with B. B has no control over C. B merely is able to sell and monetize its gateway because third parties such as C are creating APPS covering the remaining 5 steps.

Under the initial panel decision, B has no infringement liability toward A. Clearly, B contemplated the remaining 5 steps but was able to avoid liability to A simply by making the gateway known and allowing third parties, such as C, to create apps that fed off the gateway, thus creating a full loop which, together with the 20 steps B carried out, would read on A's patent. Your misunderstanding is that B and C should not be able to profit by basically creating two projects which, on their own, hold no value, but when dovetailed together, reads on the method taught in A's patent. It is unfair, violative of the U.S. Constitution's protection of an inventor's patent rights and simply wrong. If you truly read the majority opinion along with its deft and clear handling of the two dissents, you would also understand that no case or statute supports either dissent. The majority opinion is completely sound, it is right and it protects the individual patent holder. Simply uttering such statements as "going off the reservation" is, in and of itself, embracing two opinions (the dissents) which are outrageous and violative of the Constitutional rights held by individual inventors.

Re: Incorrect perspective

I like how you seem to insist that only one side could possibly be right here, while the dissenting judges are "outrageous and violative of the Constitutional rights held by individual inventors."

I don't find the majority opinion convincing in the slightest. They're clearly reaching to make the argument -- which is what the minority found (as did the lower court, mind you). To suggest that this idea is "crazy" doesn't seem to be supported by the narrow margin of the ruling.

Besides, you seem to not really understand the Constitutional underpinnings of patent law (or you're willfully misinterpreting them, due to your own position in that you benefit monetarily from doing so). There are no "Constitutional rights held by individual inventors." None. Such things do not exist.

Instead, all the Constitution does is allow Congress -- at its discretion -- to offer up limited monopolies *solely* for the purpose of promoting the progress of the useful arts. One can make a reasonable argument that a situation such as the ruling today goes against those limitations, and appear to usurp Congress's judgment.

I find that troubling, but I recognize people can disagree, as you and I do, without insisting that one side is obviously right.

Re: Incorrect perspective

You have to appreciate the work that goes into setting up this scenario.

You ask to explain the fairness in your scenario, but that is if we, the public, accept the premise as valid.

Your large company spends years and "valuable" resources to "create" a method patent. That is the first part of the insanity. A patent on "how to"???

What if schools and universities began to tax your large company with their own method patent? That's what schools are all about, how to. They pass on methods.

Your scenario is based on setting up a gateway to gatekeep that the internet has taken down and you want it back.

So here is the proper answer to your question about fairness. Let your Large company focus its time and valuable resources on actually inventing a product or service; leave the whole method thing to schools.

Incorrect perspective

1) Infringement was proven in the USDC. Judge Rya Zobel ruled in favor of Akamai, awarding the company $40.1 million in lost profits and $1.4 million in reasonable royalty damages. (http://www.bizjournals.com/boston/print-edition/2012/04/27/akamai-case-tests-ip-law-boundaries.html ?page=all)

2) Clearly, no one seems to dispute the inequity or unfairness in permitting the scenario I outlined, above.

3) What seems clear is that those who may disagree with my example are fundamentally opposed to method patents, per se, rather than addressing the inequity described in Akamai.

4) What results is an even clearer perspective that the Akamai majority fairly protects the Constitutional and Statutory rights provided to an Inventor and that it is absolutely crucial that this opinion stands.

Re: Incorrect perspective

Re:

So you assume someone else is guilty without proving it to show that a third party is guilty of inducing them to be guilty. Marvelous logic that.

Perhaps you should spend some time on the dissent part of the ruling (rather than just the affirmative opinion you like) and try to learn and understand why they didn't get there. I hate to say it, by your tortured justification of the affirmative opinion is another part of your monotone approach to the subject.

Re: Incorrect perspective

So what you're trying to say is that it's crazy you can avoid liability by implementing parts of a patent but not all of it i.e. not infringing. I think it's obvious that that's crazy in and of itself.

Re: Incorrect perspective

2. I do. I don't find it unfair at all. Then again, finding it fair or unfair is irrelevant and subjective and the law isn't supposed to be about making everything 'fair.'

3. So?

4. It does not follow that the result is fair or clearly more fair than before. There are no constitutional rights provided to inventors. You've raised and addressed no arguments at all to why it is 'crucial' that this opinion stands.

Unanswered position

I find it incredible that, armed with a logical, consistent and overpowering position, the responses I received are, basically, personal attacks. Bottom line, I have poured through the majority and two dissents, the majority opinion is firmly grounded in precedent and statute while both dissents are misdirected and unsupported by a case or statutory authority. Perhaps the naysayers would be more honest if they just said they do not believe in IP protection for software, whether it is grounded in copyright or patent. If you would agree to this, then I understand your point as there is really no other way for any reasonable person to view your attacks on this incredibly reasoned and logical majority opinion. I'm also unclear and still haven't received a response to the original example I provided, which, at the risk of repeating myself, is, as follows:

Entity/Person A patents a truly unique process containing 25 steps. [BTW, if you haven't obtained a utility patent, try it one day. It is one of the most arduous processes one could imagine. Many in the technology section of the USPTO, can take years and most claims in most applications are ultimately rejected. The utility patents that are granted are truly unique and in every case they represent years of hard work, ingenuity, creativeness and brilliance.]

Entity/Person B finds a way to use 20 of the 25 steps in creating a process or system, which, by itself is not functional.

Entity/Person C finds a way to use Steps 21, 22, 23, 24 and 25 and combine them with the process or system Entity/Person B has already created, resulting in a replication of the process or system taught in A's patent.

Clearly, there is an infringement of A's system or process. B and C will profit from this infringement and so far, the attackers (see messages, above) would support this piracy. Addressing this precise infringement is the underpinning of existing case and statutory authority and it is precisely what underlies the majority opinion. If you would be honest, rather than attack the court with silly comments like "out of the reservation" or silly names like "crooked judges" and just admit that you believe these sort of pirates and infringors should be permitted to escape unfettered, then your position would, at least, be more intellectually honest. Further, if you really read each brief filed in Akamai (which I did) you would understand the following: The interests you appear to disdain (large corporate interests such as Microsoft, Oracle, Sun, Facebook, etc.) that can afford to pilfer the individual inventor's intellectual property and stand still knowing that individual can't harness the power, funds or wherewithal to stand up to this theft, were those behind nearly every Amicii brief filed supporting the Appellee's position. What you don't seem to understand, or perhaps you do and are shilling for these same interests, is that the majority opinion stands for the protection of the individual investor's IP rights. The U.S. Constitution provides: Article I, Section 8: "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." It was this Constitutional Right invested in the single inventor that this opinion protects. Again, if you wish to side with the large corporate interests that fought like hell to overcome logic and reason, be my guest. But open your eyes and understand whose battle you are fighting. Further, if you really understand how this all lined up, you might realign your critique and suggest that the judges in the majority were brilliant, brave and far from "corrupt" in that they adhered to their Oath of Office:

I, (name), do promise and swear by God and His Holy Gospels that to the best of my understanding and conscience I wish to and shall in all judgments render justice to poor and rich alike and render judgment in accordance with the laws and lawful rules of God and country: I shall never, under any pretext, pervert the law nor promote injustice because of kinship, relationship, friendship, envy, hatred or fear, or for the sake of gifts or presents or other reasons, nor shall I find an innocent person guilty or a guilty person innocent. Furthermore, I shall not, before pronouncing a judgment or thereafter, reveal to the parties or to anyone else anything about the deliberations that the Court has held behind closed doors. All of this I wish to and shall fulfil faithfully, honestly and as an earnest judge, without deceit and intrigue, so help me God, in body and mind.

Yesterday was a proud day in America, in that the majority opinion protects the rights of the poorer to stand up to the rich and say, you cannot trample upon or steal my property without compensation as provided in our federal patent law. Lose the vitriol and you might begin to understand what a great opinion Akamai really is.

Thank you

Sole inventor here. IP Counsel hit the nail on the head. Large special interests won't tolerate this decision. They will fight like hell to overturn it in court or congress. People on here are either misinformed or support these same special interests. Wouldn't surprise me if they put those "attackers" up to posting the nonsense. Great analysis IP.

Re: Unanswered position

"Entity/Person C finds a way to use Steps 21, 22, 23, 24 and 25 and combine them with the process or system Entity/Person B has already created, resulting in a replication of the process or system taught in A's patent."

If Entity/Person C puts all of the steps together (and distributes/sells it), it would seem that they (C) could be held liable. If they both made a part but didn't put them together, no infringement.

Re: Re: Unanswered position

Here is the error in your reasoning. Under the original example, C sells a process/system with steps 21-25 while B markets and sells a process/system with steps 1-20. Both entities know that, alone, their systems hold no value but combined, they carry huge value and when combined they copy steps 1-25 from A's patent. The error in your answer is that neither B nor C have any contractual relationship with one another nor do they release systems that completely track steps 1-25. However, they know that when both of their processes are combined, steps 1-20 (B) and steps 21-25 (C) must be combined to work and thus, they mimic A's patented process. Otherwise, when uncombined, both would be useless and without value. This is the protection inuring to A's benefit. Can't you understand that any two (or more) entities wishing to avoid liability could conjure up a scenario like this, and under the original/erroneous Akamai decision, they would have been given a safe harbor. It was wrong, unsupported in federal statute and case authority and thankfully, now overturned.

Re: Re: Re: Unanswered position

It shouldn't matter that someone knows others can use what they make to infringe a patent. The person putting them together should be the one who is liable. Unless each individual step is patentable, too bad. What if someone uses step 1 with their own steps 2-18 to make something else? Would they then be lumped into the lawsuit also?

Re: Re: Incorrect perspective

"Instead, all the Constitution does is allow Congress -- at its discretion -- to offer up limited monopolies *solely* for the purpose of promoting the progress of the useful arts. "

Actually, this is where your interpretation of the constitution is a little too narrow, and so far the courts have certainly not agreed with you at all.

Basically, promoting the progress of the arts is not only what happens in the short run (say by a remix of a song) but rather the longer term effects of making it viable for successful song writers and singers to put all of their time towards their craft. It's that old opportunity cost thing, I would rather have a singer / song writer getting enough for their songs to make a career out of writing more songs, rather than a remix artist being able to bang out their "art". The longer term progress of the arts is more in the creation of original things and supporting the artists that do that, and not in supporting people who wish to keep going over the same ground again and again.

It's basic economics Mike, and I know you understand it: progress (in the arts or any other field) happens when the best people are getting to spend their time doing what they do best. A system that creates some control and potentially enough economic benefit for them to keep doing it gets us the most overall progress.

I think you are too caught up in the very short term effects, and you are not looking at the longer term as this plays out. True progress does not come long term in redoing what has already been done.

"
It's basic economics Mike, and I know you understand it: progress (in the arts or any other field) happens when the best people are getting to spend their time doing what they do best." *Citation please.
I love it, only the "best people" are able to create. If they are truly the best, why are they unable to continue to innovate and compete without a monopoly? Let me guess, they can't because they won't make enough money. If that's the case, they aren't the "best".
" True progress does not come long term in redoing what has already been done." Bullshit, utter bullshit.

Re:

"It's basic economics Mike, and I know you understand it: progress (in the arts or any other field) happens when the best people are getting to spend their time doing what they do best." *Citation please. "

It's called "opportunity cost". look it up.

"I love it, only the "best people" are able to create. If they are truly the best, why are they unable to continue to innovate and compete without a monopoly? Let me guess, they can't because they won't make enough money. If that's the case, they aren't the "best"."

it's not a question of the "best" people. Anyone can create. But those who are skilled at the art are much more valuable making that art than washing windows for a living.

It's not a question of competing without a monopoly. First, there is no monopoly on writing songs. Second, it's only a question of having the rights to sell, license, and market one's own works.

If there is no money in that, then they stop making music (movies books software whatever) and go off to do something that pays them a living wage. If that job takes up all their time and they no longer write songs, then to me the progress of the arts has been hindered.

"" True progress does not come long term in redoing what has already been done." Bullshit, utter bullshit."

Citation please - and try to explain how you progress by standing still.

"it's not a question of the "best" people. "
Then why did you say it is? You can't have it both ways.

"Anyone can create." I agree.

"But those who are skilled at the art are much more valuable making that art than washing windows for a living."

How can they make money washing windows without a patent? Poor things will starve.

"It's not a question of competing without a monopoly. "

Oh, yes it is.

" try to explain how you progress by standing still"

We were discussing redoing not standing still. Nice lawyering there.

Redoing...To revise or reconstruct

Look at the clothing industry. Clothes are being redone all of the time. People make shed-loads of cash without patents on their designs. People copy them, often improving the design, and it forces the originator to innovate.

Nothing gets created without redoing something else. Everything is built on something that has been done already.

Further reading of the opinion results in a definitive understanding and complete rejection of the supercilious positions, above.

If you were to take the time to read the well-reasoned and incredibly balanced majority opinion, you would find the following:

1) The En Banc court had no need to resolve the issue of divided infringement (i.e., 35 U.S.C. § 271(a);

2) The En Banc court determined that under the Patent Act, 35 U.S.C. § 217(b) which pertinently provides: “whoever actively induces infringement of a patent shall be liable as an infringer[,]” extends liability to a party who advises, encourages, or otherwise induces others to engage in infringing conduct and that liability must, therefore, extend to any party who induces the commission of infringing conduct, where the “infringing conduct is split among more than one other entity.”

4) Importantly, in footnote 1 to the majority’s opinion, the Court reasons, “[b]ecause liability for inducement, unlike liability for direct infringement, requires specific intent to cause infringement, using inducement to reach joint infringement does not present the risk of extending liability to persons who may be unaware of the existence of a patent or even unaware that others are practicing some of the steps claimed in the patent.”

5) Accordingly, the concerns (or ginned up arguments fostered by shills promoting the losing party’s position) are completely invalid. The Majority goes on to rely, on the Congressional and Legislative History underlying section 271(b) which commands the result obtained in the case. Further, the Majority correctly dissects and reduces the vacuous conclusions in both dissents by carefully addressing each case relied upon and correctly distinguishing each, in the main, as in each, there was no actual finding of infringement which might be credited to the party in question.

6) Bottom line, if you read this incredibly well-crafted opinion, you will conclude that it is sound and certainly not, by any means, a stretch. Rather, had the minority position prevailed, there would have been the need to conduct many Herculean leaps of logic, the like of which, would have doomed the case on further appellate review.

A great ruling... seriously...
This would allow Prior Art to include "Oh this bunch of people could have done it that way (even if they didn't actually do it that way)" and therefore the patent is invalidated due to prior art. All method patents are invalidated... the world is a better place for it.

Either that of they try to put it in practice, there is a revelution and the Patent Office is the first against the wall... win - win right?

Re:

Re: Unanswered position

Do you actually think anyone will waste the time necessary to read your ridiculously lengthy drivel stream? You certainly seem to have a very high opinion of yourself, not shared by anyone else on the planet.

Re: Hmm...

Re: Incorrect perspective

Seriously? This is techdirt.

"violative of Constiututional rights" -- that is an absurd statement. Please read the Constitution. No where does it provide individual inventors a right to anything. PERIOD. It grants Congress the power to provide such a right. This is a very important distinction. The dissent was merely interpreting what Congress did, i.e., the statute.

The majority created new policy--thus encroaching upon Congress's power and disrespecting separation of powers, i.e., violating the constitution.

Perhaps the majority's policy is a good policy. I see it both ways, but that's besides the point.

Re: Incorrect perspective

Re: Re: Re: Unanswered position

If company B can show that steps 1-20 have inherent value without steps 21-25, has the patent of company A (steps 1-25) still been infringed?
If so, doesn't the patent held by A essentially grant control of *all*of steps 1, 2, 3, ..., 25? After all, 25 different parties could all collaborate to contribute a single step to the 25 step process, thereby duplicating the process described by A's patent.

My worry here is that it's very likely that one of the 25 steps in A's patent involves words like "the internet", "via HTTP", or "web-based".